In preparing the year- end financial statements for 20X7, the controller of Risk ’ n Save Inc. discovered that the opening inventory for 20X6 had been over-stated by $ 20,000. The company has a 20% income tax rate.

Required:

1. How will discovery of this error change the amounts previously reported on the com­pany’s SFP and SCI for the years prior to 20X7?

2. What will be the impact on the company’s 20X7 reporting? Prepare a journal entry to correct the error at the end of 20X7, if needed.